A formal written offer that is required by and filed with the SEC to sell securities that provides an investor with the necessary information to make an informed decision. A prospectus explains a proposed or existing business enterprise and must disclose any material risks and information according to the securities laws. Companies file a prospectus when they are offering stocks, bonds, and mutual funds. Companies file a preliminary and a final prospectus, and the SEC has a list of specific guidelines as to what should be included in the prospectus for various securities.

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